Slide 1: 2018 Interim Results Presentation
2018 INTERIM RESULTS PRESENTATION 27 February 2018
Slide 2: Agenda
OVERVIEW 2 AGENDA OVERVIEW STRATEGIC FINANCIAL OPERATIONAL OUTLOOK REVIEW ANALYSIS REVIEW Eric Diack Eric Diack Adrian Eric Diack Eric Diack Executive Executive Macartney Executive Executive Chairman Chairman CFO Chairman Chairman REVIEWED 2018 INTERIM RESULTS │ 27 FEBRUARY 2018
Slide 3: Overview
OVERVIEW
Slide 4: Report back on execution
4 REPORT BACK ON EXECUTION Completed a robust strategic and operational review Appointment of managing directors at Aveng Manufacturing and Aveng Grinaker-LTA Civils business unit Turnaround programme advanced at McConnell Dowell Financial performance in line with plan Strong project execu
Slide 5: Salient features
5 SALIENT FEATURES Strategic review completed with the following outcomes Identified core businesses that support the overall Group long-term strategy Recommendation on a sustainable capital structure Six months results highlights: Revenue increased by 13% EBIT profit of R94 million vs R
Slide 6: Strategic review outcome
STRATEGIC REVIEW OUTCOME | he 6 ef Ba a BES jes
Slide 7: Overview of strategic plan
7 Overview of strategic plan Creation of a robust and long-term sustainable group As announced in September 2017, management together with an independent strategic advisor have concluded a strategic review of the Group The purpose of the strategic review was to evaluate all requirements to suppo
Slide 8: Strategic action plan
8 Strategic action plan A carefully executed action plan is required to create a sustainable group Significant issues faced by the Group Proposed66step Proposed step action actionplan plan 1 Simplify Simplify Complex business with five operating groups and 24 Reduce number of business units operat
Slide 9: Optimisation
9 1 Simplify Portfolio optimisation with focus on growing core operations Focus on growing revenue and profitability of core operations • Strong management teams • Sound, stable performance Optimisation • Growth markets • Currency hedge • International market and industry diversification • Extract s
Slide 10: Growth
10 1 Simplify Creation of an international infrastructure and resources group International infrastructure and resources group An internationally focused infrastructure and resources organisation, operating in developing and fast growing regions, with effective access to chosen markets Aveng group s
Slide 11: Reshape
11 2 Reshape Aveng is implementing a new lean and agile operating model Achieving an efficient operating model Key building blocks for an efficient operating model Overall strategy • Decentralised and simplified organisational structure • Empowered management At present the group operates with a m
Slide 12: Grow
12 3 Grow A core business focused on strong management teams i ii Moolmans McConnell Dowell • Well-recognised brand for specialist capabilities across the South African-based leaders in open cut contract mining across infrastructure value chain delivering world class infrastructure Africa with: •
Slide 13: Moolmans
13 i Moolmans Well established and respected in Southern African markets and have presence in the rest of Africa Select current clients 21 projects with estimated value of R24.5bn Number Value Order of (ZAR book projects bn) Overall strategy • Mali Secured 11 8.7 Secured order book R0.14bn Potential
Slide 14: Moolmans: operational excellence and partnerships
14 i Moolmans Operational excellence and developing partnerships are our focus Leverage existing relationships with mining clients Inventory optimisation Relationships with OEMs and major suppliers are in place • Utilise mine design knowledge and operational experience to Client The drive focuses on
Slide 15: McConnell Dowell
15 ii McConnell Dowell Diversified portfolio of projects and blue chip clients Select current clients 112 projects with estimated value of AUD11bn Number Value Order of (AUD Overall strategy book projects bn) • Secured 31 1.2 Likely to 19 1.5 secure Potential 62 8.3 Total 112 11 Specialist capabilit
Slide 16: McConnell Dowell turnaround programme
16 ii McConnell Dowell Turnaround programme on track RESET DELIVER GROW EXTENDED GROWTH 1.Reset the organisation 1. Stabilise operations 1. Strong performance – current footprint 1. A recognised and respected market leader in all 2.Empower the business 2. Loss-making projects 2. A growing business o
Slide 17: Dispose
17 4 Dispose Objective is to complete all disposals by end of FY2019 in an orderly fashion Non-core assets to be sold in an orderly fashion to maximise value Objective is to complete all disposals by FY2019 Overall strategy Support management teams and our employees in orderly ownership transi
Slide 18: Deleverage
18 5 Deleverage Current debt levels are unsustainable and need to be right sized for successful transition Aveng is evaluating options to determine the most appropriate capital structure and long term funding requirements Current debt position Deleveraging Deleveraging through: Operational cash fl
Slide 19: Deleverage: convertible bond
19 5 Deleverage Convertible bond hinders ability to unlock value for shareholders Convertible bond Overall strategy Convertible bond is creating significant constraints in Aveng’s capital structure It is Aveng’s intention to explore options to early settle all or a portion of the convertible bon
Slide 20: Unlock shareholder value
20 6 Unlock shareholder value The current valuation of the Group is at a significant discount to the sum-of-the-parts (SOTP) valuation A conservative SOTP valuation shows the potential for significant value unlock for all stakeholders This is primarily underpinned by the valuation of McConnell D
Slide 21: Way forward
21 Way forward Our plan requires a three year outlook to optimise stakeholder value Three year transition Immediate Transition Sustainable Next 6 months 12 - 24 months 24-36 months • Manage liquidity • Working capital management • Grow and sustain core • Actively manage risk businesses • More predic
Slide 22: Financial Analysis
FINANCIAL ANALYSIS
Slide 23: Earnings
23 EARNINGS H1 2018 H1 2017 Results Rm Rm Revenue 16 111 14 296 Gross margin % 7.0% 6.7% Operating expenses (1 060) (1 039) Net operating earnings / (loss) 94 (164) Net interest (141) (226) Taxation (285) (37) Reported headline loss (335) (391) Headline loss per share (84,4) (98,5) Aveng Grinaker-LT
Slide 24: Segmental results
24 SEGMENTAL RESULTS Revenue Net operating earnings /(loss) H1 2018 H1 2017 H1 2018 H1 2017 Rm Rm Rm Rm C&E Australasia and Asia 6 566 4 912 51 (47) Aveng Mining 2 478 2 001 104 91 C&E South Africa and rest of Africa 3 228 3 270 (212) (62) Aveng Manufacturing 1 119 1 311 (57) 92 Aveng Steel 2 503 2
Slide 25: Statement of financial position
25 STATEMENT OF FINANCIAL POSITION Dec’17 Jun’17 Dec’17 Jun’17 Rm Rm Rm Rm ASSETS 17 544 17 687 LIABILITIES & EQUITY 17 544 17 687 LIABILITIES Goodwill and intangible assets 613 613 Borrowings and liabilities 2 994 3 066 Property, plant and equipment 4 476 4 611 Working capital 7 487 7 260 Investmen
Slide 26: Working capital
26 WORKING CAPITAL Dec’17 Jun’17 Rm Rm Inventory 2 141 2 085 Trade and other receivables 1 619 1 840 Amounts due from contract customers 4 087 4 468 Current trade and other payables (5 780) (5 909) Amounts due to contract customers (1 707) (1 351) Net working capital 360 1 133 REVIEWED 2018 INTERIM
Slide 27: Uncertified revenue and claims
27 UNCERTIFIED REVENUE AND CLAIMS Dec’17 Jun’17 HY2018 Rm Rm Rm C&E C&E Manufacturing Other & SA and Australia Mining & Processing eliminations TOTAL ROA and Asia Uncertified claims and variations 1 673 1 760 Contract claims 33 915 104 - (23) 1 029 Contract contingencies (536) (701) Uncertified vari
Slide 28: Movement in net debt
28 MOVEMENT IN NET DEBT 617 392 [VALUE] (82) (115) [VALUE] [VALUE] (1 070) Cash from Working Net finance Taxation Net capital Other & Net debt 31 operations capital charges expenditure exchange Dec ‘17 Net debt 31 change* impact Jun ‘17 * Includes successful settlement of claims – QCLNG ( R508 milli
Slide 29: Liquidity
29 LIQUIDITY Dec’17 Jun’17 Dec’17 Jun’17 Rm Rm Rm Rm Net Cash 2 439 1 996 Net Cash 2 439 1 996 South African operations 793 759 Less: McConnell Dowell 1 646 1 237 Joint operations (711) (625) Advance payments (142) (146) Borrowings 2 994 3 066 Short term facilities (700) (703) Convertible bond 1 874
Slide 30: Safety, health & environment
30 SAFETY, HEALTH & ENVIRONMENT SHE Overview 5 year AIFR trend (per 200 000 hours) Fatalities All Injury Frequency Rate (AIFR) for the period was at 2.91, indicating an improvement in the number of injuries reported 6 No fatalities recorded Improved efforts on employee health and wellbeing 5
Slide 31: Operating review
IAWW'VENE Leaders in infrastructure OPERATING REVIEW : ' te wt © th
Slide 32: Construction & Engineering Australasia and Asia: Overview
32 CONSTRUCTION & ENGINEERING │ Australasia and Asia │ Overview McConnell Dowell McConnell Dowell achieved a clear turnaround in performance supported by: solid operating performance reporting a significant increase in EBIT strengthened operating cash position sound level of work in hand M
Slide 33: McConnell Dowell - Highlights
33 CONSTRUCTION & ENGINEERING │ Australasia and Asia │ Overview McConnell Dowell - Highlights Strong SHEQ performance across all operating regions Result exceeds profit objective Earned AUD5m EBIT for HY18 Period of leadership transition for Southeast Asia and New Zealand Good progress on
Slide 34: Construction & Engineering Australasia and Asia
34 CONSTRUCTION & ENGINEERING │ Australasia and Asia H1 2018 H1 2017 H1 2018 H1 2017 Rm Rm AUDm AUDm Revenue 6 566 4 912 628 465 Operating expenses (421) (386) 40 (37) EBIT 51 (47) 5 (4) OFCF 574 (426) 48 (40) Completed projects: New contract awards: BNR Upgrade, Mangere, New Zealand Abbotts Road, F
Slide 35: Australasia and Asia outlook
35 CONSTRUCTION & ENGINEERING │ Australasia and Asia Outlook Two Year Revenue secured order book FY18 (%) Return to profitability for FY18 (AUDm) Secured 100% revenue and 97% margin for FY18 Australia 595 >100% Current work AUD$1.22 billion, down AUD$300 million from 30 June 2017 to 31 Built E
Slide 36: Moolmans Overview
36 MOOLMANS│ Overview Moolmans Merged businesses of Moolmans and Aveng Shafts & Underground will trade as Moolmans in the future Successful start up of the Gamsberg and Lefa contracts Good performance on existing contracts due to upturn in commodity prices Commercial issues at Burkina Faso r
Slide 37: Aveng Mining
37 AVENG MINING H1 2018 H1 2017 TWO YEAR ORDER BOOK BY COMMODITY Rm Rm Platinum; 5% Diamonds; 12% Revenue 2 478 2 001 Manganese; 14% Gold; 9% Operating Expenses (106) (95) Uranium; 1% Iron Ore & EBIT 104 91 Waste; 16% Zinc; 14% Coal; 3% Capital expenditure 233 38 Nickel; 25% OFCF (87) 47 HY2018 REVE
Slide 38: Aveng Mining outlook
38 AVENG MINING Outlook Two Year Revenue secured order book FY18 (%) The improved contract mining environment places the operating group in a strong position to pursue its longer-term growth strategy in selected international markets Aveng Mining 6 692 100% Moolman’s market-leading reputation pl
Slide 39: Construction & Engineering South Africa: Overview
39 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa │Overview Aveng Grinaker-LTA Very limited uncertified revenue and claims on balance sheet Revenue remained static compared to the comparative period The profitability was largely impacted by: Losses incurred on Civils projects
Slide 40: Construction & Engineering South Africa and rest of Africa
40 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa H1 2018 H1 2017 Rm Rm Revenue 3 228 3 270 Operating Expenses (165) (220) EBIT (212) (62) OFCF 147 153 Completed projects and major projects in progress: New contract awards: Buildings Mechanical & Electrical refinery shut-down and Old M
Slide 41: South Africa and rest of Africa outlook
41 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa Outlook Two year Revenue secured FY18 order book (Rm) (%) Aveng Grinaker-LTA Building (Inland 2 871 111% Secured 2 year order-book at R6.2bn including Coastal) Continued structural operating efficiencies being implemented Aveng Grin
Slide 42: Aveng Manufacturing Overview
42 MANUFACTURING & PROCESSING │ Aveng Manufacturing │ Overview Aveng Manufacturing Foreign subsidiaries in SADC, Americas, Northern Europe and Australia, trading in the mining and infrastructure markets, continue to deliver favourable results despite the recent strengthening of the Rand Rail con
Slide 43: Aveng Manufacturing
43 MANUFACTURING & PROCESSING │ Aveng Manufacturing H1 2018 H1 2017 REVENUE BY INDUSTRY Rm Rm HY2018 Power Revenue 1 119 1 311 Other 5% 16% Operating Expenses (156) (140) Rail / Transport 5% Mining EBIT (57) 92 33% OFCF (91) (50) General Infrastructure Water & 36% Environmental 5% Power Other 2% 11%
Slide 44: Aveng Manufacturing Outlook
44 MANUFACTURING & PROCESSING │ Aveng Manufacturing Outlook Market conditions expected to remain challenging in the short- to medium-term Focus to improve operational efficiencies, working capital and consolidating manufacturing footprint remain a high priority. A number of leadership changes
Slide 45: Aveng Manufacturing Outlook
45 MANUFACTURING & PROCESSING │ Aveng Manufacturing Outlook Addressing under performance remains the key focus and will be addressed aggressively Amongst specific focus areas will be: Cost reduction Working capital reduction Product and footprint optimisation Pursuing new contracts and o
Slide 46: Aveng Steel Overview
46 MANUFACTURING & PROCESSING │ Aveng Steel │ Overview Aveng Steel Automotive market showing signs of improvement with general merchanting demand remaining low Aveng Trident Steel volumes remained static Average steel price increased by 7% since June 2017 Cash flow remained positive despite
Slide 47: Aveng Steel
47 MANUFACTURING & PROCESSING │ Aveng Steel H1 2018 H1 2017 Rm Rm Revenue 2 503 2 989 Operating Expenses (136) (167) EBIT (13) (68) OFCF 39 163 Volumes (kt) 214 277 Average price 11 913 10 968 (R) (P/ton) • Total volumes and average selling price above only reflects Aveng Trident Steel • Results sho
Slide 48: Aveng Steel Outlook
48 MANUFACTURING & PROCESSING │ Aveng Steel Outlook Stable prices for the next six months Improvement in exchange rate will result in less pressure on working capital Further rationalisation and efficiency improvements planned Improvement in financial performance expected for full year Aveng
Slide 49: Outlook
OUTLOOK — (aN ere
Slide 50: Two year order book & FY18 secured work
50 TWO YEAR ORDER BOOK & FY18 SECURED WORK Two year order book Secured Work (%) HY2018 FY2017 FY2018 Rm Rm % McConnell Dowell 11 652 15 250 McConnell Dowell 111% Aveng Grinaker-LTA 6 189 6 832 Aveng Grinaker-LTA 107% Aveng Mining 6 692 7 754 Aveng Manufacturing 542 79 Aveng Mining 97% TOTAL 25 075 2
Slide 51: Prospects and outlook
51 PROSPECTS AND OUTLOOK Australasia, Southeast Asia and Mining markets provide meaningful growth opportunities South African infrastructure and industrial market is expected to remain muted for the medium-term Execution of the strategic plan will be the key priority Aveng Grinaker-LTA – Trans
Slide 52: Question & answer session
QUESTION & ANSWER SESSION | De et O A a ot
Slide 53: Annexures
ANNEXURES i & © mt &
Slide 54: Revenue: Construction & Engineering
ANNEXURE 54 REVENUE │ Construction & Engineering H1 2018 Australasia H1 2018 H1 2017 South Africa and rest of Africa H1 2017 Rm Rm and Asia AUDm AUDm Aveng Grinaker-LTA Building and 1 842 1 783 Coastal Australia 372 178 Aveng Grinaker-LTA Civil 588 516 Engineering New Zealand and Pacific 91 156 Aven
Slide 55: Revenue: Manufacturing & Processing and Mining
ANNEXURE 55 REVENUE │ Manufacturing & Processing and Mining H1 2018 H1 2017 H1 2018 Aveng Steel Aveng Manufacturing H1 2017 Rm Rm Rm Rm Aveng ACS 215 209 Aveng Trident Steel 2 503 2 485 Aveng DFC 228 237 Aveng Steeledale (sold)* - 504 Aveng Duraset 232 232 Total 2 503 2 989 Aveng Infraset 370 388 Av
Slide 56: Construction & Engineering South Africa and rest of Africa
ANNEXURE 56 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa TWO YEAR ORDER BOOK HY2018 REVENUE BY GEOGRAPHY HY2018 FY2017 % Rm Rm change 6% Aveng Grinaker-LTA Building & Coastal 2 871 3 641 (21) South Africa Aveng Grinaker-LTA Civil Engineering 1 636 1 492 10 Rest of Africa Aveng Grinak
Slide 57: Construction & Engineering Australasia and Asia
ANNEXURE 57 CONSTRUCTION & ENGINEERING │ Australasia and Asia TWO YEAR ORDER BOOK HY2018 REVENUE BY GEOGRAPHY HY2018 FY2017 % Australia Rm Rm change 3% Australia 595 675 (12) 14% Southeast Asia New Zealand 200 213 (5) 66% 17% New Zealand Southeast Asia 291 408 (25) Middle East Middle East & other 18